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80% of Recruiters Will Fail

April 05, 2016

80% of recruiters will fail

According to the register of new companies at the UK Companies House, 4,083 recruitment agencies registered from 2014 to 2015 (a 20% increase on the total figure, in just one year). Similar amounts have registered in the last year. The recruitment market is in a bubble, surely. The economy isn’t that healthy yet….

In actual fact, total numbers of recruiters are increasing, but at nowhere near the same rate. How is this possible? Well, within the first two years of their existence, 80% of these new recruitment firms will fail.

Now that may tally well with the oft-quoted figure that 9 out of 10 start-ups will fail, but recruitment is hardly a blue-sky business sector. There is a clear role for a mediator in the supply and demand of talented professionals, and, like it or not, companies are not able to do it themselves every time.

So, if the niche is filled so profitably by long-term incumbents, why do so many of the newbies still fall at the first couple of hurdles? As a supplier to the industry, here are a few humble ideas:

Minimal experience. “I’ve been a Marketing Director, it takes one to know one, recruiting them will be easy, right?” Theoretically, anyone from any industry background and any function could have these thoughts. It is true that industry knowledge is an important part of a recruiter’s toolkit, but it if far from the only requirement. I am sure that you will glean from the recruiters in the comments that this profession is far from easy to get “right.” Anyone can indeed be a recruiter, but there is no guarantee that they will be any good at it.

Financial naivety. Lack of cash flow can mortally wound any business, but for a recruiter, who has not thought through their business plan, it can be fatal. If you invest in a team (and infrastructure to support them), you should realise that the mechanics of getting paid are not as simple as they seem, especially if you venture into the temp market. Your income stream will not be smooth and corporate recruitment functions can be capricious at even the sniff of a downturn.

Focus on sales, not service. Hitting the phones and convincing thirty clients that you can fill their roles is useless if you cannot source and identify the right candidates. If you fill three of those roles through the law of averages, which will give you a reasonable monthly return, but it also leaves you with twenty-seven clients for whom you didn’t deliver. Subsequently, do you decide to build relationships with your three successful clients, or do you go down the easy route of 30 cold-called roles again? Too many new recruiters take the second option. There are not “plenty of clients” out there, and poor client service is the downfall of any newbie recruiter.

We work with some amazingly successful recruiters – they are passionate about what they do and realistic about what they can deliver. There are fantastic examples of best practice everywhere, but they are all too easily ignored by newcomers out for a “quick buck.” Don’t be one of the 80%.

Peter Giltrap, Director EdenGroup